Palm on Friday warned investors that development delays by PalmSource on Palm's next operating system have hurt the hardware maker's ability to compete in the smartphone and PDA markets. PalmSource, Palm's spun-off software division, has also violated a royalties contract, Palm said in its annual report. Despite those potential hurdles, Palm says it is continuing to work with PalmSource to develop a new operating system featuring a Linux kernel, though no timetable has been set.